The EU′s Agricultural Dilemma | Business| Economy and finance news from a German perspective | DW | 22.06.2005
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The EU's Agricultural Dilemma

While German farmers protest against dumping prices for their products during their current annual meeting, others call for a reduction of EU agricultural subsidies that make up the largest part of the bloc's budget.


These German farmers want more money for her milk

Brussels currently spends more than 45 billion euros ($54.1 billion) on agriculture with the biggest chunk reserved for subsidies that go to the union's 11 million farmers.

"The EU spends two euros a day per cow," Britain's new minister for European affairs, Douglas Alexander, recently summed up the situation.

These subsidies were one of the main reasons why negotiations over the EU budget failed at the June 16 -17 summit, plunging the 25-nation body into its worst crisis so far.

France especially opposed a reduction as Britain was unwilling to give up a decade-old rebate is receives as the country does not profit as much from the agricultural subsidies as other states. It means that the union will continue to spend 10 times more money on agriculture than it does on education and research.

Two billion for olive oil

The list of the EU's support for agriculture includes financial help for investments, funds for young farmers and payments to farmers who go into early retirement. The bloc subsidizes new farms in areas where few exist and supports efforts to improve the processing and marketing of agricultural products.

Portugal: Olivenplantagen in der Nähe von Alquera

Olive tree plantation, near Alquera, Portugal

One important segment is the funding of specific products. A German farmer receives money for exporting eggs while a Spanish winegrower gets EU euros for his work. Grain subsidies make up the biggest portion with 11 billion euros while two billion euros are spent on aiding the production of olive oil.

In 2003, the distribution of aid changed profoundly as EU leaders did away with a system that remunerated farmers according to the amount they produced.

"This was meant to get farmers to adjust their production levels to market demands," said Monika Hartmann of the Institute for Agricultural Policies in Bonn.

Now, special requirements can be attached to payments.

"Cross-compliance makes it possible to check that farmers adhere to fertilization and labeling rules," said Udo Hemmerling, an expert on economic policies at the German Farmers' Association.

Some checks are in place

Biobauernhof bei Heidenheim

Farmers meanwhile are not in direct contact with Brussels at any time. Subsidies are distributed by local governments -- in Germany, that responsibility lies with the 16 states.

All member states also have control systems in place to prevent abuse. According to Hemmerling, agencies check 5 percent of farms each year. He added that as a result of the checks, reclaims can amount to hundreds of millions of euros in some member states.

A global problem

The reason why only few politicians are willing to criticize the subsidies has to do with national interests. While France heads the lists of subsidy backers, Germany's agriculture also could not survive without the help. In bad years, German farmers barely manage to make enough money to cover their costs -- a problem that's largely caused by price dumping in recent years.

Bayrischer Bauer mit Traktor, Berge, Agrarpolitik, Landwirtschaft

International comparisons show that few countries can manage without agricultural subsidies. Switzerland, Japan and the US all protect their own farmers, making it even harder to scale back subsidies.

That's why researchers and farmer representatives see a multilateral approach as the only way to change things in the long run.

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